NLMK Verona to build new EAF by 2027

Steelmaker NLMK’s facility in the Italian city of Verona will build an electric-arc furnace to be used in the production of steel slab, which is expected to be commissioned in 2027, industry sources told Fastmarkets on Friday October 25.

According to several market sources familiar with the matter, the new equipment will have capacity for 400,000 to 500,000 tonnes per year. It will first of all provide the asset with green steel semi-finished products, which is a crucial consideration because of the carbon-reduction policies of the EU.

The cost of the project was said to be as much as €600 million ($648 million).

A second factor behind the project was that it would help the company to replace import slab volumes, a large portion of which currently comes from the Russian parent company. The EU quota for Russian slab imports, set in response to Russia’s invasion of Ukraine in 2022, will expire in September 2028.

The company did not respond by the time of publication to Fastmarkets’ request for an official comment regarding the details of the project.

NLMK Verona currently has capacity to produce 450,000 tpy of various steel products, among which are forged and rolled plate, forged blocks and ingots.

According to a source close to the company, around 70% of the slab needs at NLMK Verona come from the parent company in Russia. NLMK Verona itself has a furnace able to produce 50,000 tpy of slab, which is used for ingot production. The remaining volume is supplied from Asia and Europe.

The Verona facility is part of the NLMK Europe plate division together with NLMK Clabecq in Belgium and Denmark’s NLMK DanSteel. The company also has NLMK Europe strip units at La Louviere in Belgium and Strasbourg in France.

The key Russian asset in Lipetsk has capacity for 13 million tpy of crude steel and supplies slab for its own use, as well as for other group assets and third parties.

Background
Italian heavy plate production currently relies heavily on imported semi-finished steel products, mainly from Russia and Asia.

In January-July 2024, total slab imports into Italy amounted to 1.07 million tonnes, according to Global Trade Tracker (GTT). Of that amount, deliveries from Russia comprised 416,265 tonnes, 39%. Deliveries from China in the same period amounted to 240,493 tonnes, and from Vietnam 158,768 tonnes.

Starting in 2026, however, when the European Carbon Border Adjustment Mechanism (CBAM) comes into effect, European steel buyers will need to prioritize bookings of steel products with a lower carbon footprint, to cut costs.

The price of CBAM certificates will be calculated by the European Commission on a weekly basis, based on the average price of the closing EU Emissions Trading Scheme (ETS) carbon dioxide (CO2) allowances for each week.

The price of a carbon emissions permit in the EU was €60-67 ($65-72) per tonne in October 2024. And the EU envisages that the free allocation of such permits will be fully eliminated by 2034.

Market participants told Fastmarkets that CO2 allowance prices will jump to €200-250 per tonne when the free allocations are halved in 2030, and that there will be a surge above €400 per tonne by 2034, when free allocations are fully phased out.

Other Italian re-rollers were also looking for opportunities to invest in green steel production. For example, earlier this year, Italy-based re-roller Marcegaglia was cleared to acquire insolvent France-based steelmaker Ascometal, and announced plans to transform the asset into a green steel hub.

Tata UK could seek recycling company acquisition

Tata Steel UK could weigh up acquiring a recycling company to ensure supply of scrap for its planned transition to an electric arc furnace, Kallanish notes.

Two sources from large UK scrap companies tell Kallanish that Tata Steel had been reviewing potential acquisition opportunities within the last 12 months, reportedly making a bid for at least one UK facility, which was not successful. The steelmaker was not available for comment on this before Thursday deadline.

However, when asked during the UK Metals Expo on Thursday about the potential for securing its own scrap processor, Tata Steel UK head of public relations Tim Rutter said: “I think if you were an MBA student, doing a project about the steel industry and moving towards electric arc furnace steelmaking, you’d list a number of options.”

“You can continue a relationship with your scrap suppliers as a customer … you can work collaboratively as we are already doing as part of our collaboration with Swansea University on segregation, or buy scrap supply and become vertically integrated,” he told Kallanish at the event in Birmingham.

Rutter noted during an earlier panel: “There is clearly an emerging trend in the industry, which is collaboration, between private industry, government, academia [and] research institutes where people, more than I ever remember in my career, are working hand in hand for the common good.”

“Watch this space” he added.

One of the market sources views the steelmaker buying a recycling company as a move with no downside. “They should, and I think they will,” they tell Kallanish. “They’re spending their money opening an EAF, and they need scrap to feed it.”

“For Tata, there is no downside. It’s security of supply, at the end of the day,” the source adds, noting that another UK steelmaker, Celsa, had recently opened its own recycling facility with a material shredder.

“Tata Steel have certain expertise in house, and they already understand what quality they’re after. They either collaborate with recycling companies to get that blend, or buy a recycling company to get it,” the source continues.

The UK exports around 10 million tonnes/year of ferrous scrap, while domestically, the feedstock has become more challenging to secure, according to market sources, even before Tata switches to EAF steelmaking from 2027. This will see the firm’s scrap requirement rise to 2-2.5m t/y.

“There’s a lot less [scrap] available now, the supply of material is a lot harder. There is less demolition from construction and macroeconomic factors, with less [consumer] spend on cars, etc,” the market source adds.

They also note the volatility in scrap markets, with peaks and troughs becoming more frequent, which can be hard to navigate for buyers and sellers.

A second market source believes Tata Steel is underestimating the challenges involved with sourcing such a volume of scrap from the market or acquiring its own recycling company.

“It’s a very steep investment and a serious amount of capital investment to change the grading [of the scrap for an EAF],” the source says. Some scrap grades can have higher residual copper levels which would need managing, as well as needing to segregate chrome from other grades, they add.

“Tata will have to pay more money for the scrap as they’re asking the yards to do more work,” they note. “Naturally, you go towards shredders, but there’s not the volume coming out of the shredders in the UK today for what they need. With Celsa competing for material, the price of the shredder feed is going to have to go up.”

The second source explains that some facilities would not be good acquisition targets due to logistical limitations, with 2mt of scrap unlikely to be transported by road, while other facilities may not have the machinery needed such as shredders.

A shredder could cost £12 million ($15.7m), in addition to the acres of land needed for segregation and sorting the material, plus staff and engineers for maintenance and repairs, the source concludes.

Carrie Bone UK

kallanish.com